EUR/USD extended gains, breaking above the 1.3300 psychological level during the American session to reach a fresh 9-month high of 1.3365 as another wave of selling hit the dollar on worse-than-expected US trade deficit. The EUR/USD has climbed over 330 pips within the last 2 days, and is on track to close the week with a 2.1% gain.
Technically speaking, the short-term indicators point for a bullish continuation next week, while a close above 1.3300 would confirm the positive bias in longer-term charts. 1.3400 now appears as immediate target for the pair, ahead of 1.3485, its 2012 peak. However, overbought readings warn of a potential correction before another leg higher. In this case, the 1.3310/00 area should offer support.
"Altogether, the news from the past 24 to 48 hours has mostly been negative for the greenback and positive for foreign currencies", said Nick Bennenbroek, Head of Currency Strategy at Wells Fargo Bank. "While it is possibly a mild surprise that the U.S. dollar is not showing more consistent weakness, we suspect the near-term direction remains lower for the greenback against most foreign currencies".